* Fed seen unlikely to offer new stimulus hint
* Brighter US economic outlook helps dollar
* German ZEW survey likely to sway euro
By Anirban Nag
LONDON, March 13 The dollar hit a 11-month
high against the yen and hovered near a seven-week high versus a
basket of currencies on Tuesday, supported by expectations that
a U.S. economic revival will keep the Federal Reserve from
resorting to fresh stimulus.
The dollar recouped losses against the yen made after the
Bank of Japan stopped short of taking aggressive easing steps on
Tuesday. That wrongfooted investors who had bet on a repeat of
the central bank's surprise easing last month.
The dollar index stood at 79.981, not far from a high
of 80.132 struck on Monday, its highest in seven weeks. Analysts
say with the Fed unlikely to be in a hurry to announce fresh
measures, given Operation Twist is in play, the focus would be
on retail sales for February.
The data is expected to reflect solid auto and gasoline
sales and is likely to push the dollar higher, especially
against the yen, with the pair likely to test the 83 yen level.
"There is an upside risk to U.S. retail sales data, given
the underperformance seen last month," said Steve Barrow, head
of G10 currency research at Standard Bank. "That should give
reasonable support to the dollar against the yen and could see
it rise well above 82.50 yen towards recent highs."
He said strong retail sales out of the U.S., as well as a
good German ZEW sentiment survey, would combine to support
stocks and growth-linked currencies like the Australian and New
The dollar rose to 82.72 yen, up 0.5 percent from
levels in late U.S. trade as stop losses above its previous high
of 82.65 were triggered. Traders reported option barriers at
82.75 and 83 yen levels that could limit the dollar's rise, for
Many though, expect more gains in the dollar, with one
near-term target seen at 83.11 yen, a 76.4 percent retracement
of the dollar's decline from April to a record low in October
last year. The yen's losses have gathered pace since the
surprise BoJ easing and there were some expectations it might
have acted again on Tuesday.
"Some players were speculating that the BOJ might take
additional steps so the result should be a bit of disappointment
for yen bears. But then again, today's decision is not something
that can reverse the yen's fall," said Osamu Takashima, chief FX
strategist at Citibank in Tokyo.
Another constant source of yen-selling these days is
overseas M&A deals and investment. Many Japanese companies are
seeking to enter foreign markets to offset a shrinking domestic
one as Japan's population declines.
While there could be some profit-taking in the dollar ahead
of the Fed's announcement at 1815 GMT, the greenback is likely
to be supported by signs of improvement in the world's biggest
economy. Data last Friday showed February was the third straight
month in which there was a gain of more than 200,000 jobs.
LIFE AFTER GREECE
The dollar's strength saw the euro ease and move closer
towards a one-month low struck on Monday. The common currency is
still smarting from fears that the European debt crisis could
worsen, despite Greece's success in securing a debt-cutting swap
The euro stood at $1.3135, not far from a one-month
low of $1.3079. Technical support for the euro is at its
Ichimoku cloud top at $1.3087 and a 55-day moving average around
Westpac strategists said they have entered a short
euro/dollar trade. They have sold euros at $1.3180 and would
look to sell more into a rally to $1.3350.
That recommendation came as the currency's outlook remained
shaky given that the euro zone economy is slipping into
recession, in contrast to a brightening picture in the U.S.
While the euro is supported by relief after Greece
successfully swapped most of its privately-held bonds and cut
its debt by more than 100 billion euros, many market players are
concerned that other peripheral countries like Portugal may
suffer a similar fate.
Only Germany looks set to continue to stand out as the one
of the few beacons of growth in Europe with the latest ZEW
economic sentiment index for March set to build on last months
The Australian dollar bounced back after hitting a
seven-week low of $1.0475 on Monday, to trade at $1.0523. While
its latest rebound could open the way for a test of resistance
around $1.0670, the currency is for now stalling at $1.0545
, capped by its 55-day moving average around $1.0555.